The growing use of natural gas is among the most important recent developments in America's energy picture. In the following Issue Brief, Adam Serchuk and Bob Means address implications of this trend for renewable energy, both in the United States and globally. The paper provides a valuable resource for environmental and energy professionals seeking to understand the complex relationship between the two cleanest energy options now available.

For practical policy purposes in the near term, natural gas can be considered a "renewable" resource. Even in the United States, where the resource base is well known, new sources of gas are being discovered. Potential discoveries are even greater elsewhere. The supply of gas is finite but, for the time being, fears of depletion will not drive policy.

Increased natural gas use is both a boon and a bane to the renewables industry. On the plus side, natural gas is inherently cleaner than coal or oil, and the gas sector is a significant potential ally in the effort to achieve environmental goals. For example, both industries are well represented in the Business Council for Sustainable Energy, an important voice for action to reduce greenhouse gas emissions. Since renewables will be unable to meet most energy needs for some time, gas is an essential bridge to a renewable energy era. Opportunities for the complementary use of natural gas and renewable energy technologies are illustrated by the gas-supported solar thermal system developed in California by Luz International.

On the other hand, the low cost of natural gas is a serious obstacle to renewables. In recent years, gas has fueled most new generating plants built or planned in the United States. The prospect of improved drilling methods and continued low prices, as predicted by the Energy Information Administration, have caused a substantial reduction in the government's estimated contribution of renewable energy to U.S. energy consumption over the next decade.

However, the price of gas reflects not only supply and demand, but also discoveries and changes in technology. Price is therefore difficult to predict. The EIA has notoriously overestimated prices in past forecasts, but recently reduced its predicted price rises dramatically. Gas prices are increasingly volatile as well, fluctuating between $1.30 and $2.40 per thousand cubic feet in the 1990s. Renewable energy technologies would provide consumers a hedge against such disconcerting swings and facilitate the job of energy planners.

Unlike oil, gas is not easily or cheaply transported, and it is not uniformly available. For many countries, gas is unlikely to be a viable energy option. Moreover, transporting gas via ship or pipeline raises concerns about leakage, which would mitigate some of its environmental advantage.

Gas and renewables will not compete seriously in most markets until the price of gas goes up or the price of renewables comes down. The good news is that the alliance between the two, which have overlapping interests, can be strengthened with only modest compromise from both.

Alan Miller April 15, 1997

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